Assignment of construction contracts
Assignment is the right to transfer 'choses in action' defined as 'all personal rights of property which can only be claimed or enforced by action and not by taking physical possession'.
This definition includes benefits arising under a construction contract such as right to payment, but not burdens such as the obligation to pay. The definition also includes claims for breach of contract.
A common error is to assume that the right to assign must be agreed as part of a contract, like a novation. Assignment is a unilateral right created by statute, Section 136 of The Law of Property Act 1925 or by the law of equity (law developed by the Chancery Division of the High Court of England and Wales).
Whilst not a contractual right, the right to assign can be excluded, or restricted, by contract, for example, it is common in collateral warranties to restrict to one assignment without the written permission of the warrantor.
Under Section 136 of The Law of Property Act 1925 the formalities required to create an effective legal assignment are:
- An absolute (i.e. not part of a debt or by way of charge only) assignment in writing signed by the assignor.
- A debt or other legal right of action.
- Express notice in writing to the debtor (no particular form of wording is necessary).
An assignment which fails to comply with the above formalities may, nevertheless, still be effective as an equitable assignment. Indeed an equitable assignment may be verbal. There is no substantial difference between legal and equitable assignments (though, of course it will be easier to prove a legal assignment), there are, however, procedural differences.
The assignee of a legal assignment sues the debtor in the assignee's own name. The assignee of an equitable assignment of a legal chose in action or an equitable chose that is not absolute, must join the assignor (as claimant if the assignor agrees, or defendant if not ) into any legal proceedings.
The effect of a legal or equitable assignment is to put the assignee in the same position as the assignor in respect of the benefits (not burdens) arising from the original transaction with the debtor. Consequently:
'... a debt which accrues due before notice of assignment is received, whether or not it is payable before that date, or a debt which arises out of the same contract as that which gives rise to the assigned debt, or is closely connected with that contract, may be set off against the assignee.'
(Ref. Business Computers Ltd v Anglo African Leasing Ltd.)
A counterclaim for unliquidated damages may also be set off by the debtor, but only to the value of the assigned debt. Further when there have been successive assignments the debtor cannot set off against claims by the ultimate assignee, counterclaims which the debtor has against intermediate assignees.
The Scottish law equivalent is assignation.
[edit] Related articles on Designing Buildings
- Alienation covenant.
- Appointing consultants.
- Assignation.
- Assignment of choses in action.
- Assignment of debt.
- Construction contracts.
- Difference between assignment and novation.
- Difference between collateral warranties and third party rights.
- Legal and equitable assignment.
- Novation.
- Novation agreement.
- Privity of contract.
- Privity of title.
- Proprietary information.
- Recovery of third party losses.
- Reliance letter.
- Restrictions on assignment.
- Reverse premium.
- Set off.
- The Contracts (Rights of Third Parties) Act.
- Title.
- Warranty.
[edit] External references
Featured articles and news
OpenUSD possibilities: Look before you leap
Being ready for the OpenUSD solutions set to transform architecture and design.
Global Asbestos Awareness Week 2025
Highlighting the continuing threat to trades persons.
Retrofit of Buildings, a CIOB Technical Publication
Now available in Arabic and Chinese aswell as English.
The context, schemes, standards, roles and relevance of the Building Safety Act.
Retrofit 25 – What's Stopping Us?
Exhibition Opens at The Building Centre.
Types of work to existing buildings
A simple circular economy wiki breakdown with further links.
A threat to the creativity that makes London special.
How can digital twins boost profitability within construction?
The smart construction dashboard, as-built data and site changes forming an accurate digital twin.
Unlocking surplus public defence land and more to speed up the delivery of housing.
The Planning and Infrastructure Bill
An outline of the bill with a mix of reactions on potential impacts from IHBC, CIEEM, CIC, ACE and EIC.
Farnborough College Unveils its Half-house for Sustainable Construction Training.
Spring Statement 2025 with reactions from industry
Confirming previously announced funding, and welfare changes amid adjusted growth forecast.
Scottish Government responds to Grenfell report
As fund for unsafe cladding assessments is launched.
CLC and BSR process map for HRB approvals
One of the initial outputs of their weekly BSR meetings.
Building Safety Levy technical consultation response
Details of the planned levy now due in 2026.
Great British Energy install solar on school and NHS sites
200 schools and 200 NHS sites to get solar systems, as first project of the newly formed government initiative.
600 million for 60,000 more skilled construction workers
Announced by Treasury ahead of the Spring Statement.
Comments